Los Angeles-based Pender Capital, a short-term, senior secured commercial bridge loan provider, has launched its first-ever closed-end interval fund that will focus on private commercial real estate (CRE) debt to capture more of the RIA market.
The Pender Real Estate Credit Fund (PNDRX and PNDIX) was converted from a Reg. D product the firm introduced eight years ago. It invests in senior secured commercial bridge loans from commercial real estate assets across the Sunbelt, and other key “flyover” regions of the U.S.
Moving that strategy into an interval fund allows the firm to appeal to the more advisory market, according to Cory Johnson, co-founder and chief executive officer of Pender.
“The genesis behind that process was we have a lot of RIAs, multi-family offices as our investors and we were looking for a better system to deliver this product to them in and an interval fund made a lot of sense,” he said. “It opened up more doors and that’s really what we’re targeting these days.”
The fund itself takes advantage of a fertile investment market that is fed by a combination of a decline in lending options and increased borrower demand for short-term loans.
“Lending criteria and underwriting standards are fragmented, inconsistent, and regionally imbalanced with many lenders currently out of the marketplace,” Johnson said. “We have a perfect storm of high-quality CRE assets and sponsors facing frozen capital markets and unfavorable terms from lenders [and] we believe that this vehicle will help mitigate these challenges for investors.”
Pender is hoping to market the fund to a wider audience as it has a $10,000 minimum and no accreditation requirements. This will allow the smaller advisors the ability to access the fund for their clients who could not do so before, according to Johnson.
“When you had a smaller advisor, you were kind of hamstrung on, they don’t have enough clients that have the accreditation that can handle the higher minimums to get into the product, but this is a democratization deal,” he said. “[It’s] something that’s easier to get the clients into and they can get more of those clients into and it’s really seemingly working from the big to the small RIAs.”
It is the first interval fund for the firm, although it is its fourth investment vehicle. It has $350 million in committed assets and has a 1.45% management fee, a five-basis point loan service fee, and a 90-10 net income split, Johnson said.
The interval fund will be available on most custodial platforms, including Charles Schwab, Fidelity, and Pershing, Johnson said.
Pender is positioning it as high quality with low volatility that will present a return in the high single digits to low double digits. The expectation is it will preserve principal while generating yield, Johnson explained adding that it is a product that will cater to advisors of different asset classes.
“We have really large ones who are loving this [because of] the ease of purchase,” he said. “And we have smaller ones that can now allocate more and get their clients more exposure to the alternative investment universe.”